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Social media influencers often seem to live glamorous lives, but offline they pay taxes just like the rest of us.
Social media content creators, like others in more conventional jobs, have until April 15 to file their tax returns with the IRS. Even if their lives look easy on Instagram, taxes are almost certainly more complicated.
“Being self-employed is more complicated than reporting W-2 income as an employee,” said Richard Pianoforte, managing director of tax at Fiduciary Trust International, which provides tax guidance to high-net-worth clients. “There are various deductions available and it is not always easy to determine the value of the products received.”
What taxes do social media influencers pay?
Influencers work as independent contractors for the companies they promote. Independent contractors are considered self-employed.
“In addition to standard federal and state income taxes, self-employed individuals are also required to pay self-employment taxes,” Pianoforte said. “Net income from self-employment is taxed at 15.3%, including 12.4% for Social Security and 2.9% for Medicare.”
Also, since taxes in the United States are pay-as-you-go, you had to make estimated tax payments quarterly based on your income. This means you pay most of your taxes for the year when you receive your income, rather than paying it all in one lump sum at the end of the year.
What is content creator income?
“Contrary to the concept of ‘freebies,’ perks often come with taxes,” Pianoforte warned.
for example:
- Sponsored Post: Any compensation you receive from a brand for content creation, whether in the form of videos, posts, or social media promotions, must be included as income.
- brand partnership: If your brand sponsors a podcast or video channel, the payments you receive must be reported as income.
- promotional items: Items received from brands for review must be reported as income at fair market value.
- advertisement: You should also consider the income you receive from advertising.
- barter: When a person exchanges services for something other than money, what each person receives in that transaction is considered income by the IRS and is taxable, said Hannah Cole, IRS registered agent and author of “Taxes for Humans.” “If a musician performs in a bar for Guinness, they have to report it to Guinness. Get a receipt,” she said.
What is tax deductible?
Examples of items eligible for deduction are:
half of self-employment tax That’s because half the amount your employer would have paid you if you worked for someone else is from your adjusted gross income.
Specific purchases dedicated to content creationdepends on the content. For example, beauty vloggers can deduct the cost of makeup and hair products used in their videos, but only When used for content. “The rule is that if it’s something you wear solely for the job and you can remove it from your body, you can get a discount, just like costumes and safety equipment,” Cole said. An influencer’s hot new hairstyle doesn’t qualify as a tax deduction, she said, and the khaki shorts and white polo shirt you might have bought for work aren’t tax deductible because you can wear them around town, she said.
Home Office deductions. Since many influencers work from home, a portion of their residence may be deductible according to the rules for home office deductions. Influencers may be able to deduct a portion of their cell phone, internet and utility bills, Cole said.
What tax forms should content creators receive?
You must receive a Form 1099-NEC from each partner who pays you $600 or more. But experts warn that you should report all income on your tax return, including the value of the products you receive, regardless of the amount or whether you received a 1099-NEC.
If you earn income from other platforms like YouTube, Instagram, or AdSense, you will also receive a Form 1099-NEC for this income over $600, online tax preparation software platform TaxSlayer says on its website.
Note: As an influencer, your state tax obligations can also be complicated if you work for a company outside your home state. You must file a tax return and pay taxes on the income in every state in which you earn income. You must also report that income on your home state tax return, but your home state typically allows you to deduct taxes paid to another state on the same income.
How many social media creators are there?
There were 27 million paid content creators in the U.S., according to a 2023 report from Keller Advisory Group, a social media and marketing specialist research group. Of these, 44%, or nearly 12 million people, are said to work full-time as creators.
The average annual salary for creators is approximately $93,000, but more than half of paid content creators earned less than $10,000 per year. A third had incomes of $1,000 to $2,000 per year. It found that 6% of Americans between the ages of 16 and 54 are full-time creators or influencers, earning an average of $179,000 a year.
Medora Lee is USA TODAY’s money, markets and personal finance reporter. Please contact us at mjlee@usatoday.com. Subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.
